Court: BP negligent in Gulf disaster

A federal judge in New Orleans ruled Thursday that BP was grossly negligent in causing 2010’s Deepwater Horizon disaster in the Gulf of Mexico, opening the door for the company to pay as much as $18 billion more for the largest ever offshore U.S. oil spill.

The ruling, by Judge Carl Barbier of the U.S. District Court for the Eastern District of Louisiana, is a major blow to the oil giant, which has been tied up in litigation over the spill for years. The initial explosion on the Deepwater Horizon killed 11 workers and sent oil spewing into the Gulf for 87 days.

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The news pushed BP’s stock price down by more than 5 percent as of just after 2 p.m.

In the ruling, Barbier said the discharge of oil was the result of BP’s “gross negligence” and “willful misconduct,” but he has not yet ruled on the amount of oil that poured out of the Macondo well, a figure that will be crucial to determining BP’s liability.

The decision could also open BP up to higher punitive damages from parties who did not sign on to a $9.2 billion settlement the company set with most plaintiffs in 2012.

BP said that it “strongly disagrees” with the ruling and will immediately appeal to the U.S. Court of Appeals for the Fifth Circuit. And it said it will argue against applying the maximum penalties in upcoming court proceedings scheduled for January 2015.

“BP believes that the finding that it was grossly negligent with respect to the accident and that its activities at the Macondo well amounted to willful misconduct is not supported by the evidence at trial,” the company said in a statement. “The law is clear that proving gross negligence is a very high bar that was not met in this case. BP believes that an impartial view of the record does not support the erroneous conclusion reached by the District Court.”

Today’s ruling is a crucial step toward saddling BP with another $18 billion in civil penalties under the Clean Water Act. Under the law, gross negligence comes with a maximum penalty of $4,300 per barrel, far higher than the penalty of $1,100 per barrel from a simple negligence determination.

As of the end of June, BP had set aside $3.5 billion to cover Clean Water Act penalties, it said in its quarterly earnings report. If it is hit with a penalty of nearly $18 billion, it would need to come up with more than $14 billion, a figure that would top the $13.4 billion profit it recorded last year.

The Obama administration has estimated that 4.9 million barrels were released into the Gulf, far higher than the 3.26 million barrels that BP has claimed.

BP hopes the court, at upcoming proceedings, will consider other factors that could help it avoid the maximum penalty.

“During the penalty proceedings, BP will seek to show that its conduct merits a penalty that is less than the applicable maximum after application of the statutory factors,” the company said in the statement.

Under legislation signed into law by President Barack Obama in 2012, 80 percent of the fines and penalties from the spill will go to coastal states for post-spill restoration.